S. Korean companies name US-China tussle as biggest business challenge

The KCCI survey showed 40.9% of businesses naming the "US-China conflict" as the trade issue causing the greatest difficulties for them

Cargo containers filled with export products are loaded onto ships at a dock in the Port of Busan, in the city’s Nam District. (Yonhap News)

South Korean businesses named the conflict between the US and China as the trade issue creating the biggest headaches in their international activities.

The Korea Chamber of Commerce and Industry released Sunday findings from a telephone and email survey of 301 South Korean businesses (58 large corporations, 141 middle-market companies and 102 SMEs) earlier this month.

The results showed 40.9% of businesses naming the “US-China conflict” as the trade issue causing the biggest difficulties for them.

The next biggest issue cited was “more rigorous environmental standards” (25.2%),” followed by “increased non-tariff barriers” (24.3%), “more intensive labor standards” (11.0%), “global corporate taxes and other increased taxation” (9.6%), “global value chain (GVC) changes” (8.3%) and “the digital transition” (3.7%).

South Korean businesses operating in the US named “more rigorous place of origin standards” as their biggest worry (24.3%), followed by “increased non-tariff barriers” (22.2%), “increased anti-dumping and other import regulations” (18.5%), “new or more stringent environmental and labor regulations” (15.3%), “an increased emphasis on allies in economic cooperation” (14.3%), and “global corporate tax adoption and other increased taxation” (4.8%).

South Korean businesses operating in China pointed to Washington’s harder line on Beijing as their biggest headache (41.7%), followed by “increased security” (20.6%), “lingering effects of the Terminal High Altitude Area Defense system deployment” (19.4%) and “weakening of the Chinese-led GVC” (17.8%).

South Korean businesses operating in the European Union (EU) named “increased environment standards such as the carbon border adjustment mechanism” (34.1%) and “increased non-tariff barriers” (30.3%).

According to the survey, the trade policy priority that companies most hope for from the government is an “expansion of bilateral cooperation such as free trade agreements” (40.0%). When combined with the 10.6% of respondents who stressed the importance of “increasing participation in multilateral trade expansion agreements,” this means over half of respondents named an increase in trade agreements as a priority.

Other major policy tasks named by respondents included a “stronger response to non-tariff barriers” (24.5%), “a response to new issues concerning, labor, the environment and the digital transition” (18.9%), and “a response to changes to the major economies’ global value chain” (6.0%).

Only 2% of respondents said South Korea should “not participate” in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), while the majority favored participating, the findings showed.

Among the companies surveyed, 36.2% favored “participating in the long run but holding off for the time being,” while 23.9% favored “entering jointly with the US if it joins.”

The CPTPP went into effect in December 2018 with 11 member countries, including Japan, Australia, Canada and Mexico.

When asked how they felt recent changes in the trade environment would affect business activity, 42.5% of respondents predicted it would become “more difficult,” compared with 48.2% who predicted “no major influence” and 9.3% who predicted it would “improve.”

When asked whether they had developed their own response plan for trade environment changes, 86.0% of companies surveyed said they had not (75.9% of large corporations, 85.8% of middle-market companies and 92.0% of SMEs), while 14.0% said they had.

By Kim Young-bae, senior staff writer

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